WASHINGTON BUREAU — Some groups are welcoming U.S. Securities and Exchange Commission (SEC) staff support for a uniform fiduciary standard for efforts to give retail customers personalized investment advice, but insurance producers say a uniform standard would backfire.
The SEC staff prepared the report to implement 
Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Today, investment advisors who are giving retail customers personalized investment advice must use a fiduciary standard of care, meaning that they must put customers' interests ahead of their own.
Insurance agents and securities brokers typically use a suitability standard, meaning that must verify that the products sold to customers suit those customers' needs.
The Financial Planning Coalition, Washington, a planner group, has commended the SEC staff for recommending a uniform fiduciary standard, and the Committee for the Fiduciary Standard, Falls Church, Va., a group that represents planners, investment advisors and others, says the SEC staff has written "an excellent study" that reflects a "keen understanding of the differences between the suitability and fiduciary standards."
Barbara Roper, director of investment protection at the Consumer Federation of America (CFA), Washington, says the study could help investors get "the simple assurance that the financial advisers they rely on for advice about retirement, college savings, and other crucial long-term goals deliver recommendations that are designed to benefit the investor rather than themselves."
But life producer and securities broker groups say implementing a uniform fiduciary study based on the study could keep some investors from getting help with their finances.
The National Association of Insurance and Financial Advisors (NAIFA), Falls Church, Va., and the Association for Advanced Life Underwriting (AALU), Reston, Va., have praised a statement issued by Kathleen Casey and Troy Paredes, the two Republican SEC commissioners, indicating that the study does not "adequately recognize the risk that its recommendations could adversely impact investors."
"NAIFA is concerned that the potential additional costs and increased potential for liability of applying a 'one size fits all' fiduciary standard of care to the broker-dealer business model could result in middle- and lower-market investors having less access to the account services and investment advice that are currently being delivered by registered representatives of broker-dealers," NAIFA President Terry Headley says in a statement.
NAIFA shares the concerns of Casey and Paredes that the study "does not appropriately account for the potential overall cost of the recommended regulatory actions for broker-dealers, investment advisers, and retail investors," Headley says.
The study "unduly discounts the risk that, as a result of the regulatory burdens imposed by the recommendations on financial professionals, investors may have fewer broker-dealers and investment advisers to choose from, may have access to fewer products and services, and may have to pay more for the services and advice they do receive," Headley says. "Any such results are not in the best interests of investors; nor do they serve to protect them.'"
AALU President Nat Perlmutter also says a uniform fiduciary standard could reduce access to important financial products and services.
"We believe that additional SEC consideration and congressional oversight is vital, and the AALU will engage on both fronts to ensure that the interest of its members and their customers is represented in this process," Perlmutter says.
Roper, the CFA representative,
has countered that "industry members" are making "unsupported and exaggerated cost claims," and she says the SEC has made little effort to challenge those claims.
Ira Hammerman, general counsel of the Securities Industry and Financial Markets Association (SIFMA), New York, a securities group, says SIFMA generally supports the idea of a uniform fiduciary standard but will continue to work with the SEC to keep any standard of care changes from hindering the role of the broker-dealer.
The SEC should "operationalize this new standard" in such a way that it "should not pick business model winners and losers," Hammerman says.
"We also appreciate the Commission's recognition that as a fiduciary duty is applied to brokers and investment advisers, such a standard should not limit investor choice," Hammerman says.
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